what's worrying greenspan? good read, page-2

Or...... he may be losing sleep over some undisclosed hedge fund collapse. Seems to be more talk about this possibility in the mainstream press lately.

Hmmmm


Fed's Stern Frets Over `Too Big To Fail` Notion For Banks
By Michael S. Derby
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Federal Reserve Bank of Minneapolis President Gary Stern reiterated Thursday his belief steps must be taken to quash the notion some banks are so large that failure on their part would require government intervention.

Stern, speaking before the Conference of State Bank Supervisors in San Antonio, Texas, drew from his recently published book, "Too Big To Fail," a topic on which he has spoken about publicly several times. The bank president said the notion of "too big to fail imposes a cost on the economy" in terms of increased risk taking by big banks, and from creditors and investors who are confident they'll be bailed out in the event of trouble. "The 'too big to fail' problem is becoming increasingly severe" given the rise of giant banks with complex activities, amid a more challenging regulatory environment.

Stern said that as part of his preferred remedy, "I am not arguing no bailouts ever. I don't think that's credible" given that authorities "have a responsibility for economic and financial stability." But even so, steps need to be taken to "reduce the probability you have to do it" and to "change the nature of the game" in a way that big blowups would be less likely.

As part of a possible solution, Stern suggested that better rules may be needed to drive a fast shut down of troubled banks, and some sort of rules codify "mandatory haircuts" for creditors could well be needed. Stern did not address the current economic outlook in his speech. He is currently a voting member of the interest rate setting Federal Open Market Committee.